As Government Releases Evidence of Systemic Mortgage Fraud, FBI Focuses on Distressed Homeowner Fraud

Why isn't Jamie Dimon on this Most Wanted poster?

The Administration finally released the HUD Inspector General Reports that consist of the only investigation of foreclosure fraud conducted as part of the foreclosure settlement.

I’ll probably have more to say about the reports tomorrow. But here’s a hint. The Wells Fargo report describes WF management refusing almost all cooperation.

Wells Fargo provided a list of 14 affidavit signers and notaries and then initially restricted our access to interview them. Wells Fargo attorneys interviewed them first and then only allowed us to interview 5 of the 14 affidavit signers. Wells Fargo told us that we could not interview the others because they had reported questionable affidavit signing or notarizing practices when it interviewed them. After discussion with attorneys for Wells Fargo and OIG counsel, terms were agreed to, permitting us to interview these remaining nine persons. The terms that Wells Fargo set required that Wells Fargo management and attorneys attend all of the interviews as facilitators. This condition resulted in delays and may have limited the effectiveness of those interviews. Wells Fargo’s terms also required that persons we interviewed have private counsel present on their behalf. Wells Fargo chose the private counsel and paid the attorney fees of the persons we interviewed. Wells Fargo was not timely in arranging the private attorneys, which further delayed our interviews.

And it concludes that WF may have have violated the False Claims Act.

Based upon the results of our review, Wells Fargo’s practices may have exposed it to liability under the False Claims Act for submitting the claims for insurance benefits to FHA without following HUD requirements. We provided our preliminary findings to DOJ for its assessment and determination on any potential liability issues.

In other words, the government has been sitting on evidence of significant crime for the last 18 months–crime that resulted in people losing their homes and the government being defrauded.

The government just gave the banks a Get Out of Jail Free Card for those crimes.

Meanwhile, here’s the financial fraud the FBI says it spent 2011 investigating, while DOJ sat on this evidence and the underlying frauds it clearly would lead to:

Mortgage fraud: During 2011, mortgage origination loans were at their lowest levels since 2001, partially due to tighter underwriting standards, while foreclosures and delinquencies have skyrocketed over the past few years. So, distressed homeowner fraud has replaced loan origination fraud as the number one mortgage fraud threat in many FBI offices. Other schemes include illegal property flipping, equity skimming, loan modification schemes, and builder bailout/condo conversion. During FY 2011, we had 2,691 pending mortgage fraud cases.

Financial institution fraud: Investigations in this area focused on insider fraud (embezzlement and misapplication), check fraud, counterfeit negotiable instruments, check kiting, and fraud contributing to the failure of financial institutions. The FBI has been especially busy with that last one—in FY 2010, 157 banks failed, the highest number since 181 financial institutions closed in 1992 at the height of the savings and loan crisis.

Distressed homeowner fraud, property flipping, and check kiting. That’s what the FBI has been looking at during the entire period when DOJ has just been sitting on this evidence of much greater, more destructive fraud.

Marcy has been blogging full time since 2007. She’s known for her live-blogging of the Scooter Libby trial, her discovery of the number of times Khalid Sheikh Mohammed was waterboarded, and generally for her weedy analysis of document dumps.

Marcy Wheeler is an independent journalist writing about national security and civil liberties. She writes as emptywheel at her eponymous blog, publishes at outlets including the Guardian, Salon, and the Progressive, and appears frequently on television and radio. She is the author of Anatomy of Deceit, a primer on the CIA leak investigation, and liveblogged the Scooter Libby trial.

Marcy has a PhD from the University of Michigan, where she researched the “feuilleton,” a short conversational newspaper form that has proven important in times of heightened censorship. Before and after her time in academics, Marcy provided documentation consulting for corporations in the auto, tech, and energy industries. She lives with her spouse and dog in Grand Rapids, MI.

19 replies
  1. jo6pac says:

    Yes the govt. release the results and there will be a lot of talking heads explaining that something really big is coming then ) wins and it all goes dark.

    wall street wins again and Main Street better think about joining OWS but then again it’s a crime if to many citizens are thinking evil thoughts about their govt. I’m looking for a fema camp in Long Beach or there abouts;)

  2. MadDog says:

    And if I remember correctly EW, we all wondered at the time why the lawsuits by the FHFA didn’t include Wells Fargo.

    Can you say the criminal banksters are in bed with the law enforcement authorities? Nothing but blowjobs for all? I thought you could.

  3. MadDog says:

    Totally OT, but the ACLU has an interesting blog post up today:

    “CIA: We Do Not “Concede or Not Concede” that Waterboarding is Illegal

    On Friday, the ACLU appeared before the 2nd Circuit Court of Appeals in New York to argue that the Freedom of Information Act (FOIA) requires the CIA to release documents describing its use of waterboarding…

    [snip]

    …Toward the end of the hearing, the three judges and the CIA’s lawyer recessed for a 40-minute classified session to discuss the documents we are seeking. When the public hearing resumed, the CIA’s lawyer made the mystifying claim that the CIA “does not concede or not concede” that waterboarding is illegal.

    We scratched our heads trying to understand what exactly this meant…”

  4. MadDog says:

    Also OT, but interesting – via Josh Rogin over at the Foreign Policy blog:

    “Exclusive: Taliban Gitmo deal is swap for a Westerner

    The pending deal to move senior Taliban figures from Guantánamo Bay, Cuba, to Qatar is part of a trade for the return of a Western prisoner, according to Senate Intelligence Committee Chairwoman Dianne Feinstein (D-CA)…

    …Feinstein said the deal involved the trade of one Westerner for the five Taliban leaders. She also confirmed the name of the Westerner in question, but The Cable has agreed to withhold that name at the request of U.S. officials out of concern for his safety…”

  5. Bob Schacht says:

    @jerryy: I think you’re not remembering the nuances in the interview. IIRC, Obama and the DOJ are arguing, in essence,
    “Well, golly gee, Fraud is such a difficult thing to prove in court, bc you have to prove *intent*, and gee whiz, how do we know what was going on in their minds? We *think* they probably committed fraud, but we don’t think we can *prove* it in court so, you know, we can’t really indict them.”

    Bob in AZ

  6. pdaly says:

    “The government just gave the banks a Get Out of Jail Free Card for those crimes.”

    If we know the DOJ knew about these crimes but got nothing in return for absolving the banks of the crimes (like bigger names to prosecute–more little fish to fry does not count), then it is too bad that we cannot indict them for obstruction of justice.

  7. pdaly says:

    Close to this topic:

    Yves Smith has a post today at nakedcapitalism.com about “JP Morgan Under OCC Investigation for Serious Debt Collection Abuses

    One commenter, Linda Almonte, (the same name as the whistleblower in the JPMorgan investigation and perhaps one and the same) left this comment under Yves’ post:

    Linda Almonte says:
    March 13, 2012 at 7:22 am

    Actually the story will be continued over the next few days and weeks. I made it to not only the OCC but also FTC, CFPB multiple Attorney Generals Offices etc.. Still hard at work trying to get the SEC to work with me and let me explain to them the evidence I handed over (I went to NY and knocked on their door and made an attorney from their enforcement division sign accepting the evidence). People need to contact their Attorney Generals and have them contact me. Several I have already communicated with including NY they need to move it along more people are impacted every day.

    Well, I certainly hope some or any of these investigations takes hold and breaks apart the bankster icebergs covering and relentlessly destroying the good ‘ole USA (and world).

    Ms. Almonte’s request to get our Attorney Generals involved sounds optimistic. I wish she would write more about what we citizens can do right now.

    Let there be sunlight and heated investigations.

  8. rugger9 says:

    What this means is that the WH theme of “we didn’t know” is still just so much hogwash. They could claim ignorance by rushing to the agreement before the SF report came out, but not this one.

    Coattails trail s__t as well. Kamala’s getting a little note in the morning

  9. orionATL says:

    am i mistaken, or are most of the names with the photos on the left of your column “foreign”.

    were holder’s (and the whitehouse’s you can be sure) attack on homeowner fraud shown to be connected to obama’s re-election campaign and to be an effort to turn attention away from the president cover-up of home mortgage fraud at major american banks, that is,

    of white house and doj and sec officials covering-up misconduct that tolerated, encouraged, or authorized various forms of home mortgage servicing fraud and, separately, of home mortgage securitizing fraud,

    it would, in my view, add a whole new dimension of amorality to barack obama’s presidential persona.

  10. Bob Schacht says:

    Matt Taibbi has several new columns out recently on the mortgage crisis, one exposing the crimes of JP Morgan Chase (“J.P. Morgan Chase’s Ugly Family Secrets Revealed,” March 13, 9:18 AM ET), and the other on the Bank of America (“Bank of America: Too Crooked to Fail“, March 14.
    “The bank has defrauded everyone from investors and insurers to homeowners and the unemployed. So why does the government keep bailing it out?”

    But the most devastating may be Goldman Executive Greg Smith’s Brave Departure (March 14) along with his op-ed piece in the NYT. This is because people invested in GS may just decide to take their money elsewhere, instead of being treated as sheep to be fleeced by Goldman Sachs. Besides the Op-Ed piece by Smith, we have also the report by Carl Levin. So, while GS tries to belittle Smith, there is plenty of evidence from other sources to validate what he is saying.

    Bob in AZ

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